Mercedes 2006 Annual Report Download - page 176

– Equity maintenance undertaking. The consortium members
have the obligation to contribute, on a joint and several basis,
additional funds to Toll Collect GmbH as may be necessary
for Toll Collect GmbH to maintain a minimum equity (based on
German Commercial Code accounting principles) of 15% of
total assets (a so called “equity maintenance undertaking”).
This obligation will terminate on August 31, 2015, when the
operating agreement expires, or earlier if the agreement is
terminated. Such obligation may arise if Toll Collect GmbH
is subject to revenue reductions caused by underperformance,
if the Federal Republic of Germany is successful in claiming
lost revenues against Toll Collect GmbH for any period the system
was not fully operational, or if Toll Collect GmbH incurs
penalties that may become payable under the above mentioned
agreements. If such penalties, revenue reductions and other
events reduce Toll Collect GmbH’s equity to a level below the
minimum equity percentage agreed upon, the consortium
members are obligated to fund Toll Collect GmbH’s operations to
the extent necessary to reach the required minimum equity.
Cofiroute’s risks and obligations are limited to €70 million.
DaimlerChrysler Financial Services AG and Deutsche Telekom AG
are jointly obliged to indemnify Cofiroute for amounts exceeding
this limitation.
While DaimlerChrysler’s maximum future obligation resulting from
the guarantee of the bank loan can be determined (€230 million),
the Group is unable to reasonably estimate the amount or range of
amounts of possible loss resulting from the guarantee in form of
the equity maintenance undertaking due to the various uncertain-
ties described above, although it could be material.
debis AirFinance. In November 1995, DaimlerChrysler assumed a
45% equity ownership interest in debis AirFinance B.V. (“dAF”),
an Amsterdam registered Private Limited Liability Company that
was established for purposes of leasing aircraft and related
technical equipment to airlines and financial intermediaries. Several
banks held the remaining ownership interests in dAF. Daimler-
Chrysler held significant variable interests in dAF, a variable interest
entity, but determined that it was not the primary beneficiary
and therefore not required to consolidate dAF. DaimlerChrysler’s
involvement with dAF consisted primarily of its equity interest and
also subordinated loans receivable and unsecured loans provided
to dAF. In the fourth quarter of 2004, DaimlerChrysler recorded
impairment charges of €222 million relating to its investment which
were based on estimates of the fair value of DaimlerChrysler’s
proportionate share of dAF’s underlying equity and of the loans
provided to dAF.
In June 2005, as part of the Group’s ongoing strategy to focus on
its core automotive business, DaimlerChrysler sold its 45% equity
interest in dAF and its outstanding subordinated loans receivable
and unsecured loans to dAF for €325 million in cash to Cerberus
Capital Management, L.P. The sale did not have a material impact
on the Group's net income. Prior to the sale, DaimlerChrysler
accounted for its investment in dAF using the equity method of
accounting.
4. Acquisitions and Dispositions
Acquisitions
MFTBC. In 2003 and 2004, DaimlerChrysler acquired from
Mitsubishi Motors Corporation (“MMC”) in two transactions a
65% controlling interest in Mitsubishi Fuso Truck and Bus
Corporation (“MFTBC”) for aggregate cost of €1,251 million.
MFTBC is involved in the development, design, manufacture,
assembly and sale of light-, medium- and heavy-duty trucks and
buses, primarily in Japan and other Asian countries. Beginning
with the consummation of the transaction providing Daimler-
Chrysler with control over MFTBC on March 18, 2004, the Group’s
consolidated financial statements include the operations of
MFTBC in the Truck Group segment. Before that, the Group’s pro-
portionate share of MFTBC’s results was included in the Truck
Group using the equity method of accounting (see also Note 34).
Subsequent to DaimlerChrysler’s acquisition of a controlling
interest in MFTBC, a number of quality problems were identified.
DaimlerChrysler was able to comprehensively assess those
quality issues, define necessary technical solutions, a course of
action to implement them and estimate the cost to be incurred
to address and remedy the identified quality issues.
Of the €1.1 billion quality costs recorded in 2004 by MFTBC, (i)
€0.1 billion was recognized in “financial income (expense), net”
in the statement of income representing DaimlerChrysler’s
proportionate share of the results of MFTBC, which was included
on a one month lag relating to amounts attributed to refinements
to estimates that were made before MFTBC was fully consolidated,
(ii) €0.7 billion was allocated to cost of sales representing the
sum of the 43% attributed to the March 2003 investment
(for which the purchase price allocation period was closed) and
the 35% of the costs attributed to minority shareholders of
MFTBC; (iii) €0.2 billion to goodwill attributed to the 22% interest
acquired in 2004; and (iv) €0.1 billion to deferred tax assets.
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